Manufacturing firms face challenges, layoffs due to high cost of doing business
Manufacturing firms in Ghana are facing significant challenges that have forced some of them to downsize their businesses and lay off workers. The high cost of doing business in Ghana, combined with rising utility tariffs and high tax levels, has made it difficult for many companies to remain competitive.
The Chief Executive Officer of the Association of Ghana Industries (AGI), Seth Twum Akwaboah, recently spoke out about the situation in an interview with the Joy News Channel’s PM Express Business Edition.
Akwaboah warned that some foreign shareholders are pressuring firms to shut down their operations due to the challenges they face in Ghana.
He also highlighted the fact that it is less expensive to operate similar businesses in other West African countries, putting Ghanaian firms at a disadvantage. According to Akwaboah, the situation could worsen in the coming year, with access to credit becoming an increasing concern.
One factor contributing to these challenges is the Domestic Debt Exchange Programme, which could have an impact on the capital and liquidity of commercial banks in Ghana. However, Akwaboah was hopeful that the Financial Stability Fund planned by the Bank of Ghana could help address concerns about access to credit and the cost of credit in the country.
He also emphasized the need for the government to protect local industries by reviewing its tax and utility tariff regime, and by subsidizing utility tariffs for industries.
Ghana is currently facing its worst economic crisis in a generation, with capital outflows, a crushing debt-service burden, and rapid currency depreciation wreaking havoc on government and household finances.
The consumer inflation rate in Ghana stood at 53.6% year-on-year in January 2023, down slightly from a more than two-decade high of 54.1% in the previous month, according to recent data. The government has implemented a number of economic reforms in an attempt to stabilize the economy, but more needs to be done to support local industries and promote sustainable growth.
One potential area for growth is renewable energy. Ghana has abundant renewable energy resources, including solar, wind, and hydro power, which could help reduce the country’s dependence on fossil fuels and bring down energy costs for businesses.
The government has already taken steps to promote renewable energy, including through the establishment of the Renewable Energy Act in 2011. However, more needs to be done to provide incentives for businesses to invest in renewable energy and to develop the necessary infrastructure.
Another area of concern for the manufacturing sector is the lack of skilled labor. According to a recent report by the World Bank, Ghana faces a significant skills gap, particularly in the areas of science, technology, engineering, and mathematics (STEM).
This is a major barrier to innovation and growth in the manufacturing sector. The government and the private sector need to work together to address this skills gap by investing in education and training programs that will equip young people with the skills they need to succeed in the modern economy.
The challenges facing the manufacturing sector in Ghana are significant, but there are also opportunities for growth and development. The government and the private sector must work together to address these challenges and promote sustainable economic growth that benefits all Ghanaians.
Renewable energy, skills development, and improvements to the tax and utility tariff regime are all areas that could help support the growth of the manufacturing sector in Ghana.
